The second wave

Heard of the sub-prime crisis? Meet the Option ARM crisis:

The chart (stolen from a Casey Research article) shows how many mortgages re-set to a new payment, usually higher. With the sub-prime fiasco, people often had low initial interest rates, a lot like the teaser rate on a new credit card. Once the interest rate reset to a higher level, the payment increased and people defaulted in droves.

Option ARMs are even worse, since they allow people to (for example) pay only the interest and none of the principal for the first X years. Or, in some cases, people paid even less than that, and the total amount of the loan was actually growing over time because they weren't even keeping up with the interest. Many of these folks will be doubly screwed when the "teaser" period expires and they have to begin making normal payments. Not only will they be typical principal + interest payments, but the interest will be calculated at a higher rate. Defaults galore!

Also, prime mortgages are defaulting these days due to job losses, which was not the case when the sub-prime debacle began.

We have a long way to fall in housing, even now. If you own a house on a fixed-rate mortgage and the payments are manageable, congratulations, you'll be paying off the mortgage early when the dollar hyperinflates. If you don't own a house, congratulations, housing should be dirt cheap in a few more years. And, because we are approaching the long-awaited stock market crash (yes, I was very early and have learned the hard way just how long the market can stay irrational)... well, gold and silver will get knocked down a peg as well. Which is to say, they'll be on sale! For cheap! And the precious metals are a safer way to accumulate savings than by depending on the dollar-- whose fate, as with every other fiat currency, is sealed.